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Background

The AIP reauthorization “Vision100 – Century of Aviation Reauthorization Act,” included a provision that allows the use of Airport Improvement Program (AIP) funds for revenue-producing facilities, such as hangars or fuel farms. Specifically, the law states:

“The Secretary may decide that the costs of revenue producing aeronautical support facilities, including fuel farms and hangars, are allowable for an airport development project at a nonprimary airport if the Government’s share of such costs is paid only with funds apportioned to the airport sponsor under section 47114 (d)(3)(A) (nonprimary entitlement) and if the Secretary determines that the sponsor has made adequate provision for financing airside needs of the airport.”

Project Funding

The Federal share of the cost of allowable revenue-producing facilities can only be funded with non-primary entitlements. State apportionment and discretionary funds cannot be used for the Federal share of these project costs.

Types of Facilities

Current policy limits eligibility to hangars and fueling facilities as revenue-producing facilities. The intent of the statute is to support the construction of “new” facilities which “add additional revenue producing capability” for the facility; however, the FAA will review acquisition of existing facilities on a case-by-case basis. Improvements to exisiting facilities requires approval from FAA headquarters. Replacement of facilities is only allowed if there is a demonstrated need and the replacement increases capacity.

Airside Development Needs

The law requires that the FAA must determine if the sponsor has made adequate provision for funding the airport’s airside needs before a grant can be issued for the construction of an allowable revenue-producing facility. To facilitiate this determination, the sponsor must:

Provide documentation outlining the airport’s airside development needs and a financial plan for addressing those needs.

Demonstrate that the airport meets safety critical standards for Runway Protection Zone (RPZ) and Runway Safety Areas (RSA). This is a prequisite condition for consideration for funding a revenue producing development project.

Have clear approaches and the published approach and airfield category must match the current approved Airport Layout Plan (ALP).

As an example, a low Pavement Condition Index (PCI) rating (or a “Fair” 5010 runway condition) would indicate a need to invest in the airport’s runways before funding a revenue-producing facility. The financial plan can include AIP funding. However, keep in mind that the FAA must fund the highest priority work with non-primary entitlement funds and revenue-producing facilities can only be funded with nonprimary entitlement.

If an airport’s capital improvement plan (CIP) identifies a need for Discretionary/State funding in the next three years, the FAA will not approve funding for a revenue-producing facility.

Fuel Facilities — Ineligible costs

Some costs related to a fueling facility improvement are not eligible under the AIP.

Costs associated with maintenance, including replacement or upgrades of existing fuel systems, are not eligible.

Replacement of existing pumps with card reader pumps are not eligible.

Costs associated with demolition of an existing fuel farm, environmental mitigation, and clean-up are not eligible.

Requirements for Hangars

The construction of aircraft hangars requires the Sponsor to meet additional conditions. Before AIP funding can be approved, the sponsor must comply with the following:

In situations where the sponsor delegates management of a hangar to a FBO, the FBO becomes an agent of the sponsor and can receive an administrative fee for this service. The sponsor must enter into a short-term lease/management agreement for this service, which is separate from the FBO lease agreement.

The FBO can offset direct expenses related to the management/operation of the hangar. (i.e., maintenance, utilities, and insurance costs) against the revenue that is produced from any subleases.

The airport must receive the revenue generated from the subleases that is not offset by the FBO’s expenses and/or administrative fee. The primary purpose is to provide revenue to the airport, not the FBO.

The hangar can only be used for storage of aircraft (no prorations for other aeronautical uses, i.e., maintenance, paint shop, aircraft restoration, etc.).

The FBO must make the hangar available to all aeronautical users without discrimination and cannot make it available only to their customers.

Aeronautical users cannot be denied the use of the hangar if they do not obtain services from the FBO (i.e., purchase of fuel).

Title to the hangar must remain with the sponsor.

No improvements are to be made to the hangar without sponsor approval.

Project Documentation

The Sponsor must submit the following documents to the FAA before a project’s eligibility for AIP funding can be approved:

Statements that airside development needs have been met, or a financial plan to fund airside needs over the next 3 years.

Justification for the project.

Insufficient or incomplete documentation will require additional submittal from the sponsor or may result in a determination that the proposed project is ineligible for AIP funding.

Additionally:

The FAA will base other aspects of the proposed eligibility determination on current AIP eligibility guidelines as described in FAA Order 5100.38 and as amended by official program guidance letters..

All projects approved under this provision must be identified on an approved ALP. Construction of these facilities cannot proceed until the FAA issues an approved airspace review determination letter.

The intent of the law is to provide for the construction of facilities to generate additional revenue for the operation, maintenance, and development of nonprimary airports. Sponsors must maintain complete documentation of all revenue received from these facilities for the purpose of a thired party audit.The FAA may periodically review these records to ensure that the airport is receiving sufficient revenue.